Financing Options for Businesses: Alternatives to Borrowing Money

Most credit card companies allow retailers to receive needed funds for their businesses. This is a great avenue for business owners who may not qualify for funding from their banks. In order to receive the funds, the retailer must have been a customer of the credit card company for one to three years previously, depending on the company involved.

Merchant Financing

The retailer would apply for the loan that has no credit check, the same as he would a loan from the bank. Conditions for approval of the advance are not as stringent as they are for a loan, since the retailer is seeking an advance against the future credit card proceeds. There are minimum sales volume requirements and the retailer can receive an advance from $3000 to $300,000, in some cases depending on the monthly sale volume.

It takes only 24 hours for approval and it would take from five to seven days to receive the money. The bank would debit the retailer’s credit card statement for the amount of the monthly payment to pay back the advance at a lower interest rate than a loan. Depending on the bank, the retailer would have one to three years to pay it back.

The advance can be used for any business-related expense such as expansion, marketing, purchasing inventory, or equipment. If the advance is paid back in a timely manner, it improves the retailer’s credit score so that in the future, if he plans on acquiring additional financing form the bank, his chances are improved for securing the loan.

Bootstrapping

Another way of financing the business is through trade credit financing. In this case, the supplier would give the retailer the supplies needed to operate the business on the condition that he/she pays for the goods at a later date. The business owner would need to write a business plan and share the plan with the supplier to show good intentions. This is a great way for the retailer to show integrity.

For instance, the supplier would give what the retailer needs to do business and instead of giving him/her 30 days to pay back the order, he gives them 60 days. Then the retailer would proceed to operate the business and earn enough money to pay for the order at the end of the 60 days. If done in the early days of the business, this could give the business a boost.

In conclusion, there are alternative ways of acquiring financing to keep the business in operation.

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